TaxTMI 
TaxTMI 
2023 (5) TMI 579
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....der section 143(3) of the Income-tax Act, 1961 ['the Act'] in the manner passed by him and the Commissioner of Income Tax (Appeals)-8, Chennai ['CIT(A)' erred in upholding the said order of the learned AO, to the extent prejudicial to the appellant. The order of the CIT(A) being bad in law is liable to be quashed in its entirety. 2. Grounds relating to limited scrutiny 2.1. The learned CIT(A) and learned AO erred in concluding the assessment on issues and matters which are different from the reasons for limited scrutiny communicated during the assessment proceedings. 3. Grounds relating to reclassification of land from 'stock-in-trade' to 'capital asset' 3.1. The learned CIT(A) has erred in concurring with the learned AO in re-characterizing the land held by the Appellant from 'stock-in-trade' to 'capital asset'. 3.2. The learned CIT(A) erred in concluding so, without appreciating that: (a) the appellant is engaged in the business of development, sale, advisory and other real estate development in the accomplishment of which the impugned land was held by it as stock-in-trade. ....
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....e income is contrary to facts, bad in law and liable to be quashed. 7. Ground on set-off and carry forward of business loss 7.1 Without prejudice to the above, the learned AO has erred in not appreciating that the appellant is eligible to set-off brought forward losses as claimed in the return of income. 7.2. Assuming without admitting that the interest income of Rs. 17,35,627 is to be classified as income from other sources, the resultant loss under the head profits and gains of business or profession' (on account of deduction of interest income) would constitute business loss and would be eligible for set-off against income from other sources'. 8. Grounds relating to levy of interest under section 234B and section 234D). 8.1. The learned AO erred in levying interest under section 234B and section 234D. On facts and circumstances of the case and law applicable, levy of interest tinder section 234B and section 234D is not leviable. The appellant denies its liability to pay any interest. The grounds mentioned above are independent and without prejudice to the other grounds preferred by the Appellant. The appellant craves ....
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....ed/treated as stock-in-trade in books of accounts and the audited financial statements. 4. Grounds relating to capitalization of expenditure to cost of project amounting to Rs.15,73,839 4.1. The learned CIT(A) and AO have erred in capitalizing the revenue expenditures incurred and claimed amounting to Rs. 15,73,839 to the cost of project, without appreciating (a) that the appellant had set-up and commenced its business in the earlier years and that the expenditure incurred after the date of setting up of the business is allowable expenditure; (b) that the expenditure incurred by the appellant neither relate to acquisition of any asset nor is attributable to any asset and therefore cannot be capitalized to the cost of assets; (c) that the impugned expenditure is revenue in nature; (d) the judicial precedents relied by the appellant in this regard. 4.2. Assuming without admitting that the said expenditure is not allowable under the head profit and gains from business or loss', the same should be allowed as a deduction under the head 'income from other sources'. 5. Grounds relating to enhancement of in....
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....ompany has not carried out its main business and not generated any revenue from the main business activities. From the interest income, the assessee company has claimed expenses of Rs. 39,21,033/- which were not connected with the interest income earned since there was no nexus between income admitted and expenditure claimed. According to the AO, the expenditure claimed by the assessee cannot be allowed and the interest income received by the assessee is to be treated as income from other sources and he added the same to the total income of the assessee. 6. From the assessment order, it is culled out that reason for selection of scrutiny was "large difference in the closing stock shown in the balance sheet and profit and loss account of the current year as per the return of income". In this regard, the assessee was asked to reconcile the differences. The assessee submitted reply vide letter dated 15/11/2016, annexed the break-up of W-I-P and also produced the copies of the documents for purchase of lands. The total cost of land was Rs. 184.43 crores and in addition the following other expenses were also included in the W-I-P of Rs. 193.81 crores which has been reproduced by the ....
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....s.25,46,089/- the for the assessment year 2014-15 and for the assessment year 2015-16 of Rs.4,54,400/-. The CIT(A) after issuing hearing notice treated these amounts as capital expenditure and disallowed from being claimed as capital expenditure and directed the AO to re-compute the income as per the observations at para No. 06, 07 & 08 of the his order. 10. Aggrieved from the above order, the assessee filed appeal before the ITAT. 11. The ld.AR reiterated the submissions made before the lower authorities and submitted that the case was selected for scrutiny only for the limited purpose of "large difference in the closing stock shown in the balance sheet and profit and loss account of the current year as per the return of income". The AO has travelled beyond the notifications issued by the CBDT which are placed at Paper Book containing page No. 01 to 30 includings case laws. He submitted that as per the Instruction NO.7/2014 [F.NO.225/229/201 4-ITA.lI], dated 26-9-2014 that the assessment order passed is beyond jurisdiction and it does not survive because case was selected for limited scrutiny and in support of his arguments he relied on the following judgment:- 1. S....
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.... warehouses, machinery, plant, stock in trade, mineral rights, concessions, privileges, licenses, easement or interest in or with respect to any property and to carry on business as proprietors of flat and buildings and to let on lease or otherwise apartments therein and to provide for the conveniences commonly provided in fiats, suites and residential and business quarters. 13. The ld.AR also submitted that the assessee has only capitalized the expenses that are of enduring nature and the expenses that were not of enduring nature were capitalized but charged to revenue account for the year. He submitted that the CIT(A) has wrongly exercised his power and hence the income against these expenses were of the administrative nature which help the company to sustain itself and it is not attributable to any particular asset held by the company. He further submitted that the AO has wrongly capitalized the expenses on the ground that the assessee company has not commenced its business operations whereas there is nothing on record to suggest that the assessee has not commenced its operations and on the contrary, the operations were undertaken to procure the lands to make it fit for he pr....
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....ITR 606 (Bom) 16. He further submitted that the interest received by the assessee on deposits is income from business, the funds were kept for the business purpose. The AO & CIT (A) have wrongly held that it is income from other sources. He further submitted that even if the said interest income is brought to tax under the head income from other sources, the resultant loss under the head business income of Rs. 7,21,174/- would still be eligible for being set-off against income from other sources of Rs. 17,35,627/- and resultant total income for the sake of assessment would still be the same Rs. 10,14,453/-. The ld. AR also relied on number of judgments in support of his arguments which are as under:- 1. Chennai Properties & Investments Ltd. v. CIT [2015] 373 ITR 673 (SC) 2. CIT v. Elnet Technologies Ltd [2020] 271 Taxman 25 (SC) approving the Madras High Court in CIT v. Elnet Technologies Ltd. (2013) 30 taxmann.com 63 (Mad.) 4. Kohli Estates (P.) Ltd v. ITo [2020] 183 lTD 650 (Del Trib.) 5. G.Venkataswami Naidu & Co. v. CIT [1958] 35 ITR 594 (SC) 6. CIT v. Mohakampur Ice & Cold Storage [2006] 281 ITR 354 (Allahabad) 7. Raja J....
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.... v. Asst.CIT [2006] 9 SOT 48 (Bang - Trib.) Brought forward business loss should be eligible to he set-off against interest income 1. CIT v. Cocanada Radhaswami Bank Ltd. [1965] 57 ITR 206 (SC) 2. Lavish Apartment P Ltd v ACIT [2018] 405 ITR 165 (Del) 3. CIT v S&S Power Switchgear Limited [2019] 415 ITR 376 (Mad) 4. CIT v Ramnath Goenka [2003] 259 ITR 26 (Mad) 17. The ld.DR relied on the order of the lower authorities and he strongly submitted that the lower authorities have rightly decided the issue against the assessee. The assessee invested its surplus capital amounts in fixed deposits and received interest which is clear from the paper book page No. 279, therefore, both the authorities are justified in treating the interest received on Fixed Deposits as income from other sources. In support of his argument, he relied on the judgment of Hon'ble High Court of Allhabad in the case of Pr.CIT Vs. M/s Sangam Power Generation Company Ltd., in ITA No.87 and 88 of 2016 and he submitted that in this case the Hon'ble High Court has considered various judgments rendered by various Hon'ble Courts. He also relied on the judgment of the coordina....
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....2015, I do not find any where in the scrutiny notice that the case has been selected under "CASS". I am in agreement with the arguments advanced by the ld.DR on this issue and the CBDT Instruction and letters issued on different dates relied by the assessee (Supra) are in regard to the cases selected under limited scrutiny under CASS on the basis of AIR/CIB/26AS. On going through the instruction No.7/14, at para No.2 it has been clarified that the scope of enquiry in the cases selected for scrutiny during the financial year 2014-15 on the basis of AIR/CIB/26As and in para No.2 it has been clarified that the scope of enquiry should be limited to verification of these particular aspects only. Further on instruction No.20/2015 dated 29/12/2015, as per No.2(ii) the said instruction is applicable only to the cases selected under CASS on the parameters (Supra) of AIR/CIB/26AS. Instruction No.5/2016 dated 14/7/2016 is applicable on the basis of CASS selection under limited scrutiny. As per letter F.No.DGIT(VIG)/HQ/SI/2017-18 dated 30.11.2017 placed at page No.2, the instructions dated 26.09.2014, 29.12.2015 & 14/07/2016 are applicable for the limited scrutiny. On perusal of the copies of ....
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....eed dated 02/05/2017 by Mrs. Soumadaram, Siruseri in favour of the Special Officer Siruseri Panchayat Thirupour for the public use of the land. Earlier there was no approach road for the assessee. The assessee has also received letter from Tamil Nadu Electricity Board, which is placed at paper book 335. I further observe from the paper book submitted by the assessee dated 08/10/2021 that the case has been completed u/s 143(3) of the Act for the assessment year 2017-18 and 2018-19 but no additions/discussions has been done by the AO on this issue, whereas on perusal of the financial statement for the year ending 31/03/2017 & 2018, the inventory at Schedule No.12 of the Financial statement are appearing under the head current asset. 22. The ld.DR submitted that res judicata is not applicable in the Income-tax proceedings, every year is independent and separate assessment year, therefore, the decision for the one assessment year cannot be considered for the subsequent or prior assessment years. This argument of the ld. DR will not apply in this case. I observe from the arguments of both the sides and the documents submitted by the assessee that the assessee has not re-characterized....
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....he ld.DR of Hon'ble High Court of Allahabad, I uphold the order of the CIT(Appeals) that the interest received on fixed deposits by the assessee is to be treated as income from other sources, therefore, ground No. 04 raised by the assessee on this issue is rejected. 25. In ground Nos.5 and 6, the assessee has challenged the entire expenditure of Rs.39,21,033/-, which has been considered by the revenue authorities as capital expenditure. I note that the assessee has started its business in the earlier years and the business has already been set up. The assessee has incurred huge amounts towards legal and professional charges and the lower authorities have not disputed the expenditure incurred by the assessee. The only dispute is whether these are a capital or revenue expenditure. 26. During the course of hearing, the ld.AR submitted that the legal and professional charges has been incurred towards business of the assessee for maintaining the peaceful possession of the land acquired. Since I have uphold ground No.3 in favour of the assessee, therefore, these expenditure also would be treated as revenue expenditure. Accordingly, I allow these grounds raised by the assessee on th....